Korea Inc. must learn from Toshiba’s fall

Toshiba, one of Japan’s household names and once a leading Japanese electronics company, was delisted on Wednesday after 74 years on the Tokyo Stock Exchange. The brand once epitomized Japan’s tech prowess and pride. It made history with the world’s first color TV in 1960, the first flash memory chip in 1980 and the first laptop in 1985. Since its founding in 1875, it led the Japanese industry and economy with innovative technologies.

Toshiba still maintains technological competitiveness, holding the most patents in quantum key distribution, which is essential for quantum computing. But its era is done. In September, the company confirmed it would be taken over by a consortium led by private equity investor Japan Industrial Partners for $14 billion. Under a new ownership, the company would go under rigorous restructuring to seek revival.

Toshiba’s spectacular fall from grace started with the revelation of structural accounting malpractices in 2015, followed by major financial problems at its U.S. nuclear plant subsidiary. The chain troubles led the company to shed multiple businesses, including its key and lucrative chipmaking unit. Half of the stake in Toshiba Memory, ranked No. 1 in flash memory, was sold to a global consortium that included Korean rival SK hynix in 2017. Visionless businesses were kept while profitable assets were sold in poor business maneuvering. The company also lacked new technology that could save its future.

The fall of Japan Inc., including Toshiba, should be a wake-up call to Korean majors like Samsung, Hyundai, SK and LG. Samsung Electronics and SK hynix command the global memory market. They are also ushering the new wave in chipmaking through the high bandwidth memory, enabling a superfast data transfer necessary to power artificial intelligence. Hyundai Motor is in the front group in electric vehicles led by its IONIQ5 and EV9 fleet. LG Energy Solution ranks No. 2 in the EV-powering battery market. Korean companies are enjoying the same spotlight Japanese peers used to come under. But they are being closely chased by Chinese and other followers. Nothing lasts forever. Under the fast-changing global value chain due to the protracted U.S.-China competition, Korean companies, too, can face the sad fate of Toshiba.

Toshiba’s case brings the moment of truth for Korean companies, educational institutions, government and politics. Are we vigilant and responding fast against the changes from the global technology war? Do we really have competitive innovations to lead the global market? And do we have an ecosystem supporting the growth of companies like Samsung and Hyundai? Fortunately, the bipartisan agreement on next year’s budget included some corrections to the controversial 16-percent cut in government subsidies for research and development. Time is running out.